CMFAS CM-SIP CFDs & Leveraged Foreign Exchange question: eventually proved right about the price direction

CMFAS CM-SIPCFDs & Leveraged Foreign Exchange

Suresh holds a long CFD for several months and is eventually proved right about the price direction, yet his net return is disappointing. The MOST likely explanation is that:

A Dividend credits on the long position were clawed back when he closed it.
B The leverage ratio fell each month, so his exposure shrank as the price rose.
C The provider re-charged the opening spread every day the position stayed open.
D Cumulative daily financing charges eroded the return over the long holding period.

Show the answer and explanation

Answer: D. Cumulative daily financing charges eroded the return over the long holding period.

Daily financing costs accumulate on a leveraged position, so a long-held CFD can produce a poor net return even when the eventual price view is correct — which is why these products suit short-term trading.

Common mistake

Overlooking that holding-cost drag can outweigh a correct directional view on a leveraged product.

Practise more CM-SIP CFDs & Leveraged Foreign Exchange questions

Exam-style questions with worked answers, then full timed mocks. Free to start.

Start practising →

Study note: CFDs & Leveraged Foreign Exchange CMFAS CM-SIPpractice questions & mock exams

CMFAS CM-SIP CFDs & Leveraged Foreign Exchange question: eventually proved right about the price direction

Answer: D. Cumulative daily financing charges eroded the return over the long holding period.

Common mistake

Related CMFAS CM-SIP questions

CMFAS CM-SIP CFDs & Leveraged Foreign Exchange question: eventually proved right about the price direction

Answer: D. Cumulative daily financing charges eroded the return over the long holding period.

Common mistake

Related CMFAS CM-SIP questions